A new report from the Insurance Institute of Canada (IIC) has found that technologies involving artificial intelligence (AI) and big data analytics will play a big role in reshaping the insurance industry in the next 10 years – and insurers will have to prepare accordingly for these anticipated changes.
The report, entitled “AI and Big Data: Implications for the Insurance Industry in Canada,” noted that both AI and big data are expected to transform the industry in very big ways because of the multiple opportunities they present – particularly when it comes to supporting underwriting decisions, claims management, investment management, hiring practices, and even marketing.
According to the IIC, “AI has the potential to fully harness the power of data to better anticipate and serve the needs of consumers.” It can also be used to automate the most tedious of insurance tasks, freeing up valuable time for the insurance workforce.
Meanwhile, big data analytics refers to utilizing advanced tools to analyze complex mass storage of data. In the past, insurers could only conduct actuarial analysis of recent loss experience to anticipate future claims on a quarterly or annual basis because they were limited by their analytics capabilities. However, the IIC said that current technology allows insurers to use real-time analytics to better understand the needs of their consumers, track industry trends, and make better informed decisions on claims, pricing and operations.
To best anticipate this tech revolution, IIC stated that “a focus on insurance consumers and their perspective will be critical to facilitating wide acceptance of new tools, systems and technologies.”
Insurers should also look to other industries that have undergone rapid change in response to emerging technologies, the institute said, and adopt the lessons they learned on managing risks. They should also expect insurance regulators to take interest in how the industry utilizes AI and big data, so insurers should champion these new approaches and demonstrate how they benefit customers in order to build confidence in the insurance industry, IIC advised.
The IIC has provided recommendations for the industry to address risks in AI and big data over the next 10 years:
- Inform consumers;
- Embrace innovation;
- Be prepared for uncertain regulation;
- Create new insurance programs;
- Take the time to do it right (and don’t be scared to fail!);
- Respond to changing consumers;
- Invest in new technology; and
- Accept different views of fairness.